hello, you're watching "worldwide exchange." headlines from around the globe. equities swirl higher. chinese factory activity, fed minutes cheering investors up. now we focus on european pmis. a small rise in full-year earnings, the ceo tells us the company's taking market share in china. >> we have consistently said the right of growth in china has been averaging around 7% is more than sufficient to underpin our volume. we saw this in the past year with an 8% growth in our volume and continued gain in market

share. >> more than 30 people have been killed aafter a blast rips through a market in china gin jiang region. when you look at what has happened in russia, if you don't have the guts to invest here, you better stay at home. you're watching "worldwide exchange," bringing you business news from around the globe. a warm welcome today, this is "worldwide exchange." we'll be in ukraine and st. petersburg fairly shortly. the health of the ecb.

the flash composite pmi coming in at 53.9, exactly as expected according to the reuters poll. it was 54 in april. the composite output price index, 58.7. flash pmi 52.5. that's a dip down from april. it was 53.2 in the poll. the services pmi 53.5. it's a tick higher from the 53 in the reuters poll. it's weaker than we might have expected. but that all means that the composite number has come out on the same. it's worth pointing out this morning that the french composite pmi flash was estimated at 49 3. in the first quarter we saw france was flat gdp growth. the german composite pmi number

estimated at 56.1. and that was the manufacturing component came in weaker. let's get some breakdown with this with the man who works for the business that compiles it all, chris williamson, chief economist at market intaker. doesn't matter where you go in the world, there's no escaping a cnbc camera. good to see you this morning. what is this telling us, this latest number? it's a slight slowdown in activity. obviously we're still on the gdp front concerned by italy and france. >> yes. so pretty much unchanged on the situation at the headline level, once again, we're seeing big divergences in the region. germany's index, there was a wobbling in manufacturing maybe a bit due to easter and some ukraine effects. the german service sector is starting to boom. germany, looks like he's on for

another quarter of strong growth. 0.7% gdp growth. good performance. france ornt, tn the other hand, moving in the other direction. perhaps another flat gdp reading in the second quarter. the rest of the region, we don't break down every other country for this pmi. not to say those countries aren't included in the rest of the number. it's signaling the fastest growth since 2007. employment up for the second month running in the rest of the region. that's seeing better growth since early 2008. so the periphery, where the big concern has been is showing real signs of improvement. from what we saw, that's being led by countries like spain, an island where reforms have really helped boost growth. now, countries that haven't enacted those reforms, anything

to the extent of the likes of france and italy, that's where you're seeing the weakness. ecb can quite rightly point some fingers, saying this is not our fault. government needs to do more to get growth going in those countries. we're doing all we can, maybe some small measures will come in june as they've hinted at. i'm not expecting anything major. i think there will be small tweaks. >> do you think the ecb should be taking some action next month? even if they should cut the deposit rates to negative and a small cut in the refi rate? >> well, maybe. i think if anything, those small measures that i'm expecting are, if anything, going to be targeted at getting the euro down a bit if they can manage to do that. fundamentally, is a negative deposit rate going to change the economic fortune for the euro area? no, i don't think it is. maybe if they do clever stuff in directing better credit, abs, for example, at the sme market, that could really help fill the

void of bank lending there. that may do something. it's not going to change it significantly. instead, we have a long process of growth that we need to get coming through in countries like france and italy. >> chris, we'll come back to you. we'll talk about the chinese number. i know you've had a number out of japan as well. very briefly, on this german manufacturing, do you think that's had any impact from russia and the events in ukraine? >> i was expecting it to have, when i first saw the number, i thought here we go, this is the ukraine, crimea hitting that number. we delve through the anecdotal evidence companies provided. virtually no mention of it whatsoever. i think it must be there, some uncertainty creeping in and hitting exports. importantly, the domestic economy in germany, the service sector is showing strength. that's what all the critics of germany have been wanting to see, consumers in germany

starting to come back to life, spend more money and get rebalancing agoing on. we saw that also with the european commission, consumer confidence surveys coming back up to the precrisis levels, the consumer is very much healthy. that's offsetting any export impact we might be seeing from the ukraine. >> stay there, chris. we'll come back to you. we go to kiev. once that resolves, could investors learn to love the russia market again? we'll get to the st. petersburg forum as well. we'll come to you in a second. vladimir putin, again, said he's withdrawing troops in order to reduce tensions ahead of this weekend's election. what is going to happen here? we have the favorite, who you've been speaking to, i know, petro

poreschenko. >> it's interesting, isn't it? it looks like mr. poreschenko could take this outright. there's still tensions in the east. i've been speaking to the number two right now in the polls, timoshenko. since then she spent over three years in prison. she's late to the campaign trail. but when i spoke to her, she just finished a rally. she was then mobbed by the press. we were dragged off in a back room to be able to just try and get a few minutes to speak to her before she went off again. she was finding it difficult to

walk. she's struggling it seems with a lot of pain, too. she's adamant she wants to be part of this country's future. what she has been is very vocal against vladimir putin and against russia. that's where i picked up the conversation with her and i asked her how she would handle those tensions after the election if she became president. listen in. >> translator: as i've already stated before, any kind of interrelations with russia should be four-part negotiations. not just between russia and ukraine but between the countries that signed the budapest memorandum. u.s., uk, ukraine. of course at this point ukraine doesn't have the power or possibility to face off russia. the other way is for ukraine to become a full member of the eu and nato. the majority of ukrainians support this. after the democratic world stops putin's aggression and ukraine becomes free, it will become a

proper and strong partner, able to discuss further interrelations with its neighbors on a one-on-one level and not accept ultimatums from putin or in any other countries. >> there are people, though, in eastern ukraine who don't want to join the eu. do you believe the violence there is russian led? >> i think ukraine has to be very careful and patient and present the people that live in the eastern part a strong argument to make them understand their future is not in the gray zone like crimea which would have sanctions imposed on it. not in the past, which would be in the trading union with russia. instead, our future is in the european union as a full member. i think ukrainians who understand this have to find a way to explain this is the best way forward and to persuade our compatriots in the east. for this, i suggest we immediately should be involved, invite regional governors and

international representatives who took part in the geneva talks. this would be to form a pact toward a united ukraine and end this unofficial war. >> so some crucial differences between tymoshenko, and right now, the front-runner poroshenko. she's far more vocal about a referendum in the eu. you have to wonder if that's playing against here and people realize mediation is a way forward and we need to have someone who will negotiate quietly and carefully on all these levels. we have to see within the next 48 to 72 hours if she can steal some of the votes away from poroshenko. i sat down with him ahead of those votes on sunday. tomorrow i'll be talking with petro poroshenko.

right now, back to you. plenty more to come from kiev. we've asked a number of ceos exactly how this has impacted russia. >> right now, russia continues to grow, midsingle digits. organic growth is not one of them. most countries have right now is the ruble. but the consumer spending continues to be solid in russia. >> russian companies of course are very welcome, just like chinese, indian, american companies, latin american companies. african companies. we see growth everywhere. >> i don't think any business leaders is a big fan of sanctions, because in the end, you always wonder to what extent they are really effective. from a growth point of view, really key that we keep, you

know, a good relationship with russia. all right. that's something of comments from ceos. we just had the latest german manufacturing number which suggests there may be impact on expo exports. it wasn't in the detale. steve and jeff are at the st. petersburg international economic forum, one of the subjects under discussion. before we get into that, we have comments out from the russian finance minister. >> yes, i'm going to rush off to speak to him within the hour. he's an absolutely key figure in the internal economic picture. you have two things going on, the kremlin and what is being called a mascular foreign policy in ukraine. the other is the economic crisis that russia potentially already had and has been exacerbated by

the situation in ukraine and what that's meant for lending and capital flows. because there's been various estimates about the capital outflows out of this country. in fact, various commentators, including mr. kudrin. they have talked about capital outflow as much as $160 billion. the capital outflow story is fading and actually could be replaced by capital inflows. i find that latter comment absolutely extraordinary. i'm going to speak to him about that. what is interesting is that he's toeing a very orthodox type line. i.e., there will nobody splurge in spending. there will be no excess spending to stimulate an economy which many people fear go into recession this year. that is such an orthodox line. the central bank has been working on a similar line, raising rates.

then in late april by another 50 basis points. it's straight back, orthodox economic management which kind of flies in the face of a lot of the other stuff we're seeing. >> what's interesting is, you almost have the russian central bank embracing a more austrian school of economic theory. you know, the west, the americans, the brits and others like to present themselves as monetary hawks on occasions and say they're managing inflation risks appropriately. it's the right manager policy. here in russia, very difficult for them to cut interest rates with inflation where it is. growth is slowing. >> over 7%. >> the central bank insists it will not do that for the sake of stimulating. >> you've got an inflation problem which you highlighted there with the most recent figure, 7.2, 7.3 for april. the target, that's been blown out of the water. the real target is around 5% with the other side of the coin,

growth could be flat, could be up 0.5%. could be recession this year. putin is on record as saying he wants russia to grow out 6%. that's a long way off at the moment. the economic world and what's going on in the geopolitical situation as well. they do tally with each other. we've seen a starvation along the western institutions who are pulling back their asset base in russia and pulling back from lending to russian corporates. >> i think there should be a code or caveat around some of the more positive economic commentary. here we are in st. petersburg. it serves the purpose to talk more about the direction for economy. having said that, there's been through the last 24 hours or so, a deescalation of the kremlin view on the presidential elections upcoming in ukraine. it's worth, i think, ross, playing a little clip here of president putin talking about the pulling back of troops from the ukrainian border.

>> translator: this is being done not because we're timid about keeping our troops there, we are, after all, a sovereign state. we keep our troops where we want. in order to create favorable conditions for ukraine's presidential vote and speculation around this issue, such a decision has been taken. if some people aren't seeing what's happening there, then they should have a better look. >> so i grew up playing -- now in russia, i guess we should play chess. i'm going to see the finance minister. i think you should check mate with me on who you will see. >> i will be speaking with president putin tomorrow at 12:30 cet. that's an appointment not to miss. let's send it back. >> steve, jeff, thank you very much indeed for that. let's show where we stand on european equities. just an hour and 17 minutes into the trading day here in europe. we had a bounce back yesterday, of course, for u.s. we can its,

closing up on session highs. there's some growth but rates aren't going up anytime soon. the ftse 100 is just up 11 points. yesterday it was down -- up 19 points by the close. the xetra dax, up 16 points, around 0.2%. it was up 0.6% yesterday. the ftse mib is down 0.5%. some individual stocks worth checking in this morning, the daily mail, daily mail and general trust up nearly 7% in london trade. it reported a 36% rise in first half pre-tax profit. the newspaper group confirming its outlook. it also revealed it does intend to float the property site zupla. raiff bank up 4% this morning. reporting net profit of 161 million euros. that's well above expectations and the bank re-affirming its commitment to russia, despite the current crisis. it said it had raised ukraine

provisions by around 65 million euros in the first quarter. sab miller, the brewer, up 3.5% in london trade. the latest corporate to bemoan head winds. they forecast another year of tough trading conditions. one stock that is to the down side, the royal mail, down over 5% in london as well. not delivering for investors despite posting a 2% rise in revenue. postal firm warning of head winds, including the competitive environment on the positive side of the business in particular. that does account for around 51% of group revenues. show you where we stand with bond yields today. gilt yields higher, 2.65%. italian yields, we've seen this sharp move up. peripheral spreads, italian yields around 2.9% a couple weeks ago. currently 3.17. treasury yields are what we've been looking at. this time last week we hit a

six-month low of 2.47% on the ten-year yield. those comments from the fed, kind of having a neutral impact on the dollar seasonally. take a look at euro dollar. we were down 136.50, 2.5-month low this time last week. we're sort of this, 13 .74 at the moment. dollar/yen, rebounded slightly from 3.5 month low that we hit yesterday. 180. better pmis out of japan. kuroda coming out yesterday, very much saying, look, there's no easing on the agenda. that made the yen strengthen a little bit. the sterling climbing back up towards that five-year high, up near 1.70. that's it for the markets right now. we'll take take short break. plenty more to come from st. petersburg. and we'll be joined by the man that's responsible for ubs's

wealth management division. ♪

what is this place? where are we? this is where we bring together reliably fast internet and the best in entertainment. we call it the x1 entertainment operating system. it looks like the future! we must have encountered a temporal vortex. further analytics are necessary. beam us up. ♪ that's my phone. hey. [ female announcer ] the x1 entertainment operating system. only from xfinity. tv and internet together like never before. almost week, stock funds saw $1.1 billion in outflows according to data from ici. this is the third week this year when investors moved cash out of stock funds, taking profits and fueling a fixed income rally. ceo of ubs wealth management

joins us from the ubs family of the summit in singapore. thanks very much indeed for joining us. good to see you this evening there in singapore. how are your clients feeling right now about investments? we sort of seem to be in a market where the bulls are unhappy because things aren't going up and the bears are unhappy because nothing is going down. >> that actually summarizes it quite well, right? everybody's actually looking for opportunities for growth but at the same time, wealth reservation is still the key topic. so it's a mixed bag and people want to share views, want to discuss themes, see what's on the minds at the forefront, clearly it's china, slowdown, after the election in india, people are sort of creating hopes there. there's lots of things going on, it's fascinating to be with them. >> you're in asia. you've come out early this year, say 70% of your net investment is going into asia and the

emerging markets. what does that translate into in terms of staff and getting inflows and funds under management in that region? >> so look, we're investing every roughly 3% to 5% of total revenues. revenues report 9 billion per quarter. mainly that goes into people, clearly the priorities are here in asia, as well as in the emerging markets. think about it, right. we need to further build out our ininvestment engine. we need to make sure we have access to content, work on our infrastructure. the big question is also digital, how to access these clients. here in asia, that's a hot topic. how can you have access and interact with these clients? >> how do you do that? >> as you know, we have an advisory model. our key point is to access,

clients will compliment that service with online banking. we monitor all the portfolios throughout our structures and push that information back to the clients. that is all measured along the risk return profile. so the clients really think about risk and return. i think that's very, very, very important in the prospectus we live in these days. the world is very global, has become complex. there are many, many issues, asset allocation drives most of the performance on a client's portfolio. to monitor what we are doing with the money, with their vo t involvement and match that to their expectations is kreexly important and where we want to put their focus. >> we had the 200 billion swiss franks of outflows and the settlement with u.s. tax

authorities. where does the ubs brand now stand? or try to attract new clients. i wonder now that credit suisse came out to have a bigger settlement with u.s. tax authorities, is that benefiting you? >> a lot of what you refer to is behind, including the u.s. we settled that in 2009. it's also true we have had very difficult moments, but you know, over the last couple of years we made really good progress. we reshaped our business model. wealth management is at the heart and center of what we do and who we are. we have refocused our investment bank to cope within the regulatory environment. the shape and forum of the firm is quite visible. if you are in this part of the world, ubs has never been alone in the crisis. today stacks out of the clear business model and that makes it hugely attractive for clients to come and talk to us. within wealth management, i mean, the flows have turned many

years back, we have substantial growth. we get a great share and that across our key client segments, which is ultrahigh and high net worth. that's why we spend a considerable amount of time out of asia. you see emerging markets substantially contributing. in europe, we go through the cross-border transformation as with you know, quite successfully. even switzerland has had a good rebound, of course, right? the financial sector has not yet regained the respect and interpretation in the broader public. we just need to continue to work with our clients, remediate all the issues at hand and then things will gradually improve even from here. >> just finally, your advisory clients and wealth management, how much are they holding investments in cash at the moment? what's their propensity to want to invest or not? >> so it depends, right.

people who want to be not involved at all in the investment position, that's a portion of our assets that we can manage and control ourselves. we firmly believe it's a good time to be invested. you need to be diversified and actually take benefit of the global opportunities there. my cash holdings are below 10%. if you look into the advisory book where the clients make the final investment decisions, we're still running at 30%, right? this is nearly all-time highs. i actually don't see any sense of risk on environment for private clients. you've soon the markets today, have a very clear trend. the likelihood of the upside is sort of new to the way clients think about it and the risk aversion is still a topic that comes up in every client conversation. so it's still about asset protection. you see that reflected in the asset allocation of advisory clients. >> good to speak to you today. thanks for that.

the ceo of ubs wealth management. >> thank you. >> good to see you. deutsche bank, he's basically saying he expects the new bank safety rules to further pressure the lender's regulatory ratios, one key measure, one capital ratio will suffer more under europe and the bank to employ prudential measures. we'll keep our eyes on that. meanwhile, we have the latest snapshot of uk borrowing and gdp as well. and it's the break down really for gdp. we had the flash reading of 0.8%. that was the flash estimate and it is unchanged from that in this second reading. on the year figure, up 3.1%. the annual rate of growth, that's also unchanged. what's important here is the breakdown of this.

household consumption up 0.8% quarter on quarter. big difference in net trade. that's minus 1.1% quarter on quarter as well. production plus 0.7%. uk services unrevised at plus 0.9%. services up 0.4%. services and household consumption still at the bulk of what's generating growth in the uk. sterling/dollar coming back from its highs of 1.69. chris williamson is with us, chief economist at market. chris, it still looks essentially, i mean, my first reading on the breakdown is we have the services part of the economy and household consumption providing a large chunk of the growth here. how sustainable is the uk's growth pattern? >> well, yes, there's slight

disappointment, especially in the capital formation numbers, the business investment not quite as strong as we'd like to see. i think our figure may get revised. i have a mistrust in unofficial data, especially the early releases. i think we are seeing a stronger picture of business investment than these data suggest. it's being driven by households and services, sustainables, that very much depends upon which the wages in the uk are rising. if this is being fueled by debt, it's not sustainal. we think that wages are beginning to rise. if not wages themselves, then certainly our income from employment. unemployment is rising at a record rate at the moment in the private sector. that's generating obviously more jobs for people but we're also seeing more hours being worked, more income come through. if that continues into the second and third quarters, driving more household expenditure, then it's sustainable. more mixed evidence whether it's

being fueled by credit or not. i'm not convinced it is. at the moment i would say yes, this is what you'd expect to see. the labor markets improving, spending's improving. we'll do so in the second quarter. we saw the retail sales data, the uk growing at the fastest rate in ten years. households waking up, spending more money. >> do you think we will get some actions from the financial policy committee to maybe calm the housing market and when do you think the uk does move with an interest rate hike from the bank of england? >> yes, i think we will see action from the financial policy committee to calm the housing market, whether that will have an effect or not is the big question. is it sufficient to tweak these what we call macro prudential tools, such as lending criteria, will that be enough to calm the housing market? or will they need to hike rates as well?

big urn certainty. surveys we got so far into q2, yes, it's only for april, really. but that suggests there will be another strong quarter with more job creation gathering traction. you'll see more and more calls amongst the monetary committee to do something earlier. my guess is later this year. i think it's going to be language that is very much, this is a good sign that we're able to raise interest rates, moving on a gradual path of hiking rates back to more normal levels. so as not to spook anyone. this is a good sign, the economy is returning to normal. the concern is what it does to the currency. sterling will strengthen on the back of that news. >> very briefly, you helped compile the chinese pmi number, 4 .7, but output and the orders

back over 50, very quickly, your forecast for the chinese economy? >> okay. stabilization and gdp maybe the second quarter, you know, 7.4, 7.5% is being signaled. the concern here is that liftup was driven by exports. if you didn't have had that export increase, you would have seen demand weaken. we have lackluster soons of the domestic economy from this survey in china. that's the big concern. can the authorities do something to turn that situation around? that's the big question. >> it is a good question. chris, thanks for that. have a good evening in tokyo. chris williamson joining us from market. >> thank you. plenty more to come from st. petersburg. see you in a few moments.

you're watching "worldwide exchange," bringing you business news from around the globe. and the headlines from around the globe, globe equities swirl higher. chinese factory activity, fed minutes cheering haves. european pmi data, as expected. a small rise in full-year earnings is enough cheer for investors in miller. the ceo told us the company's tenning to take market share in china. >> we have consistently said the right of growth in china, has

been averaging around 7%, is more than sufficient to underpin our volume. we saw this in the past year with an 8% growth in our volume and continued gain in market share. >> more than 30 people have been killed after a blast ripped through a market in china's xiajing region. when you look at what has happened in russia, if you don't have the guts to invest here, you better stay at home. european equities an hour an a half into the trading day. trying to move a little bit higher this morning, up 0.3% for the ftse 100.

pmis for the eurozone coming in as expected. but, again, big divergence between france and germany. france, the composite number in contraction territory. germany is doing pretty well. a divergence there between the services and manufacturing services really starting to tick along nicely in germany. on the bond markets, the treasury yields are high from where we were yesterday, 2.56%, the yield on the ten-year, .5% is where we were yesterday, moved higher by the fed. on the currency markets, euro dollar, still around this 1.3683 level. dollar/yen coming off its 3 1/2-month lows that hit yesterday. we were down sort of around 101.50. the st. petersburg international economic forum is under way. it usually attracts a host of ceos from around the globe. as tensions have escalated between the west and russia over

ukraine, a number of ceos began pulling out like alcoa, citigroup, ge and e-on. he said in light of the u.s. government requirements is why they pulled out. jim immelt said he's planning on delivering a speech in florida instead. the alcoa class was due to be at st. petersburg economic forum but he pulled out. karen caught up with him at the plats global medals award where he was named ceo of the year and asked why he was in london instead of in russia. >> we have decided to, this year, not attend the st. petersburg economic forum. the situation is unfortunate. i hope that the diplomatic

efforts under way lead to a resolution soon and at the same time, the good news is, the facilities that we do have in russia operate normally. >> did u.s. officials communicate with you that in the interest of solidarity you should cancel your trip to russia? >> i've always believed that in crisis you need to have a good dialogue. i also believed that there's a political management that in some moments needs to trump all other interests, right? and we have a situation like this today and as i said before, i'm optimistic that all parties come to the table and find a resolution in a diplomatic way, peaceful, sooner rather than later. >> there's no secret that one of your biggest competitors is a russian giant.

other market share gains are to be had because of this enchan thement with russia. >> i don't think this is a good thought that anybody who has an understanding of global matters could have. this business thrives in peaceful times. the globalization is the most powerful intention to spread wealth more evenly around the world. i think we have a very, very strong interest to continue with peaceful times, with stronger economic ties between companies and countries. most people believe that the crisis is solvable and that there are enough initiatives under way to solve it. >> klaus kleinfeld speaking. jeff is there, along with steve as well.

jeff, how notable is it there aren't many regular western ceos there and what are people saying about it? >> yes, it's very interesting. i don't know, as you were preparing your notes, ross, for "worldwide exchange" whether you caught our friend mr. dico. we said he was the first western ceo we've had on the set all morning. it's been mostly russians this morning on programming with just mr. dico, the only representative of the western business community. very noticeable. >> we noticed some very big western ceos are here. diplomatically for them, were they to be caught on cam with with mr. putin or senior members of the kremlin. it seeming to be doing the right thing rather than doing the right thing. all those corporations who

haven't sent their ceos have sent senior dell gags of employees to shore up their interest in this country. we know the germans, for instance, have something extraordinary, like 6,000 companies with huge interest in russia. we know the energy sector has enormous bilateral trade. it's not just the energy sector as well. it is consumer products, it is across the board as well, in the pharmaceutical space. it's interesting there's a lack at the ceo level. i have a sneaking feeling that there's a bigger representation at the juan yore level as well. people are talking about this long awaited deal between china and russia. people are beginning to talk now about the pivot east. actually, whether putin's kremlin is trying to negate the role of the west in financing and creating investment opportunities in russia. >> that was interesting, john kerry making comments that he did, saying he didn't think this

was in any way about diminishing western involvement in russia's business future. clearly, you know, those of us who are in the media, who like to leap on a theme lack at this whole pivot story and say this is a way for the kremlin to get back at the west over sanctions. it's interesting that we've spoken to a number of our guests through the morning, really, to get their take on the whole pivot east story. let's just have a listen to what they have to say. >> it's seeking to advance its own interest, whether or not they are in direct opposition to western viewpoints, which is understandable. i'm simply saying that that is going to be very bad for business. >> russia used to be a poor kid

out of high school but now it's becoming a grown-up adult with its own interests. it's kind of like for the other grown-ups, it's a bit hard to accept this is an equal now. >> we also want to continue working with the west, continue working with the united states, but, for example, 90% of capital committed to our platforms came from middle east and asian economies. definitely we want to invest quite a bit with them going forward. >> you can see actually a lot of focus on china and the east. but not necessarily meaning they want to diminish their activities with the west as well. that's coming from all sides as well. what i thought we'd do now is remind viewers of some of the numbers as well. they are quite startling. we're talking about an economy that president putin wants said

have an inflation target of 5%, 7.3% last time they were asked. unemployment not too bad. it's one of the bright spot. the real concerns about capital outflow and the fact that western organizations are diminishing their presence. the western financials are making it more stringent for russian companies to raise capital as well. the fundamentals are really, really tough. i'm going to be speaking to the finance minister about it. i think you'll be speaking to someone else about it. >> yes, i'm catching up with president putin. tomorrow that will be 12:30 central european time. it's an opportunity for us to cover a lot of ground. we'll talk about the economy obviously but we'll also talk about the ukraine story as the kremlin sees it, running into the presidential elections over the weekend. so from here in st. petersburg, ross, we'll send it back to you. >> that will be a great interview, jeff. we really look forward to that. that's tomorrow. plenty more to come, of course.

and if you've got any thoughts, comments, it's all online as well. a special section there on the st. petersburg forum on cnbc. m cnbc.co cnbc.com/spief2014. joining us is cnbc's eunice yoon in beijing. eunice, who is responsible and what does it mean for the likelihood of further problems. >> so far we don't know who is responsible but the government is calling this attack a serious, violent, terrorist incident. the staid media has been reporting that two vehicles rammed into a crowded marketplace in the early morning in the provincial capital.

94 people have been injured. one of the suvs burst into flames. manufacture the casualties were elderly people who were on their way to the market in the early morning hours. the injure ready currently being treated at the hospital. so far, no one has claimed responsibility for this attack and the government hasn't yet identified who's responsible but we do know this incident did take place in a very sensitive part of the country, which is home to the muslim uighur minority. that minority has been blamed in the past for other recent attacks, including one here in beijing at tiananmen square. many members of that community have been forcing their frustration with what they have called repressive policies of beijing. the public security bureau chief is on his way to the region and the president, xi jinping, has vowed to step up patrols as well as security controls and has

pledged to crack down hard on those responsible for this incident. ross? >> thanks for that, eunice. more to come. we'll keep you updated with events out of beijing. also still to come on the show, after two years of losses, growth is on the horizon. we'll get more on the company's restructuring plan. [ female announcer ] there's a gap out there.

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you're watching "worldwide exchange." sony's ceo has come out swinging after six out of seven year losses. he says this is the last year of sony's restructuring. joining us with his thoughts is senior analyst for consumer tricks at euro monitor international. >> good morning. >> this surprise being fairly upbeat. is it justified or not? >> i think it's a little early for that much optimism. if you look at their forecasts for some of the key tricks groups, they do forecast decline in cameras, but i think it's going to be a lot more drastic than what they're expecting. they are expecting a pickup in sales of tvs that's most critical. we might see a slight upswing

but it won't be quite as much for sony this coming year. mainly because really what we're going to see happening in the tv market most likely is some of the units that were purchased in 2008, 2009. those are going to be starting to get replaced. there was a bit of a glut in terms of demand at that point. so sony is probably going to sell a little bit more tvs, high value tvs, the primary tvs that people would put in their living rooms and so on. it's not going to be quite as substantial as they're forecasting. >> they -- >> going forward -- >> sorry. i was going to say, they've been undercut by other asian rivals. what do they do about that? >> basically they have to compete. what we saw over the past few years is the developing markets were driving the volume demand in terms of growth in

televisions. that's probably likely to shift, because over the recession we did see over 2008, 2009 recession that is, we saw quite a bit of sales in tvs sparked by the price cuts back then now those tvs are coming to the end of their life cycle and those will be replaced. that's mostly in the developed markets. a couple years down the road, there's more room for optimism and sonny. in japan they had a big glut in terms of tv sales a couple years later. starting in late 2009, 2010 was definitely a big year. something close to 25 million tvs sold there. so once those tvs start to reach the end of the cycle, then we have a lot more room for projecting significant growth in terms of sony's tv sales. >> yes. well, we'll see what happens.

proof will be in the pudding, i suppose. thanks so much for joining us. from euro monitor international. >> thanks for having me. plenty more to come on "worldwide exchange." we'll go back out to kiev as we hear more from presidential candidate tymoshenko and her problem with the oligarch system. also still to come, we heard from the fed yesterday as well. what does that mean for investors? the dollar/yen perked up a little bit today. we'll get into that. plenty more to come in the second hour of "worldwide exchange."

this is "worldwide exchange." i'm i i'm ross westgate. here are the headlines. fed minutes cheer investors. european pmis reassuring. reynolds, american and lorillard are reporting talks of a merger for the tobacco titan altria. a blast rips through a market in china's xinjiang region. chinese authorities call the attack an act of terror. we're at the st. petersburg international forum, the ceo of russia's leading oil company

says sanctions are not hindering his business. the chief of metals major told cnbc western restrictions are harmful for all. >> the sanctions against russia, these did not bring and will not bring positive results. because sanctions amplify tension. you're watching "worldwide exchange," bringing you business news from around the globe. hello. very good morning to you. welcome to the start of your global trading day here on cnbc's "worldwide exchange." we had the best gain in five weeks for the dow yesterday. moving up off of three-week lows, gains of 1.1%, 158 points. futures indicate a mild tick up by another 7 points, adding to that. the s&p up 0.8%, 15 points

higher. right now about a point above fair value. yesterday, currently up 2.9%. reassuring words from the fed. that's how it was perceived. there are signs of recovery but don't worry, rates won't go up yet. that's the message. this morning we've had good data out of china, pmis rebounding up 49.7, that beat expectations and output and new orders in expansion territory over 50. although maybe it comes from better foreign demand and not the domestic economy. pmis out of the eurozone today, came in as expected. sharp divergence between what's going on in france. we saw strong numbers in germany. even then, a divergence. manufacturing slightly weaker than we might have thought. the uk did confirm they grew 0.8% on quarter.

this morning, the too thecy 100 up 8 points, the xetra dax is flat. the cac current is down 0.2. the ftse off 0.8%. treasury yields moved higher yesterday as we moved through the session and posted the fed minutes. currently yielding 2.5%. we hit that fresh six-month low on the ten-year of 2.47. we have steadily moved away from that. on the currency markets, euro/dollar, this time last week we hit a 2.5-month low. 1.3650. we're above it at the moment, 1.3679. the dollar/yen got to a low of 101.80. sterling, maybe some thoughts maybe there might be a revision in that quarterly gdp number i spoke about. didn't happen. we were at 1.69 before the figure. come back with around 1.6870.

now, vladimir putin has, again, said he's withdrawing troops from the ukrainian border in order to reduce tensions ahead of this weekend's election. petro poroshenko is the favorite to win the ballot although he's facing a challenge from tymoshenko, one of the architects of the orange revolution. julia is in kiev and she joins us with more. she's been speaking to some of the main candidates. julia, is there tension ahead of this vote or not? >> there's a lot of expectation, ross, the country understands we need to get an election result, we need a president in place that can negotiate with russia, can try and solve some of the tensions in the east that we continue to focus on right now. the question is, who's going to win. right now it does look like a man called petro poroshenko, as you mentioned. fighting him and behind him by 40 percentage points is yulia

tymoshenko, the former prime minister here. she's seen as part of the old garden. that might be going against her as far as voters are concerned. is she part of a true voice for change in this country? she's been vocal against putin, very pro-europe. the other thing to remember is she's pretty frail. i spoke to her after she had done a rally. she was struggling to walk. you can see this in some of the pictures here. she was mobbed by the press. we then had to be dragged into a back room to speak to her and she was really struggling to walk. but i did talk to her about crimea. she, another candidate promised to bring crimea back to ukraine. i pointed to her that one of the other candidates said anyone who promises this is lying. listen to her response. >> translator: someone saying such words should not be elected. as he would allow for the fifth column of kremlin to an agent often fluns inside ukraine and this is unacceptable. a democratic world has to continue to increase sanctions

and to continue with stopping putin's aggression into the occupation of crimea is over. >> what do you say to those people who say you had your chance with the orange revolution and you failed? now's not the time for you, it's for somebody else. what do you say to those people. >> translator: ukraine had a chance to build a strong pro-european country but unfortunately, the president that we elected did not want to dismantle the oligarch system of power in ukraine. instead he practically became the head of the system. this is incompatible with building a pro-european country. i was not strong enough to stop this from happening and i could not persuade our president to change. for those reasons, the orange revolution was lost. today i think ukraine has a chance to build a pro-european democracy without corruption and oligarchs.

>> so two crucial questions now over the next 48 hours. can yulia tymoshenko close that gap with the leading candidate? if she can't win this election, will she work with the next president to progress and to look at the future of this country? we're going to be speaking tomorrow exclusively to the top polling candidate, mr. petro poroshenko. i'll be bringing you that interview tomorrow. for now, ross, i'll hand it back to you. >> thanks very much indeed for that, julia. plenty, of course, online as well regarding the ukraine. don't miss that on cnbc.com. joining us for the rest of the program today, stephen king, chief global economist at hsbc. good to see you. >> good morning. >> how are you putting in events in eastern europe into the mix in terms of the impact? >> this morning we had a dip down, slightly weaker than expected for german manufacturing pmi.

chris williamson from market who helps to compile that along with you guys. >> yes. >> i couldn't see anything where firms were talking about russia. he says i still think there must be some kind of impact. but hard to quantify it. >> it's one of the great unknowns where you have the political upheavals. it's tricky to work up precisely what the impact will be economically. we did work years ago at the time of 9/11, to find out what these kind of shocks meant for the economy. there's no real pattern. sometimes you have a shock that seems large but has a relatively small small economic impact. i think what is clear, though, the talk about sanctions and so on is something which is potentially more damaging from a european perspective compared with a u.s. perspective. no doubt the european economies are much more intwined with russia. to the extent there's much more nervousness or tension, it's likely to have a bigger impact

on europe and germany, for example, than the u.s. >> there is a view, though, that actually once we get the elections out of the way, investors seem viewing this as a more benign event than not. >> yes. >> i don't know whether that's right. that seems to be the perspective. russia doesn't really want to be responsible for the ukraine, they want to move in and run part of that country. >> yes. >> europe certainly doesn't want to push for aggressive kind of sanctions. >> i think that's true but there's a broader issue, the extent to which you see different kinds of political movements coming through which might look at the putin model and say aggressive foreign policy is something that might work for us as well. you start getting concerns about geopolitical instability that stems from, what starts off in russia and ukraine, becomes an issue in parts of asia. also with respect to where we are in europe, increasing support for populous parties. >> the european elections today, which will be interesting if

there's an anti-establishment vote. >> the opinion polls suggest there might be some of that coming through. the political center ground is hoping that is not going to happen. at the end of the day, they are uneasy about what the political center ground has delivered over the last few years. >> disappointed. >> yes. >> let's remind you what's on the agenda in the united states. weekly jobless claims out at 8:30 eastern. forecast to rise by 15,000 to a total of 312,000. just before 9:00 a.m., we get the may manufacturing pmi numbers and at 10:00, april existing home sales, leading indicators. best buy, dollar tree and sears holdings report results before the open. after the close, we hear from hp and gap. of course we have the minutes yesterday from the fmc meeting that took place late in april, steven. clearly the fed in no hurry to

raise interest rates. they didn't tell us an awful lot, though, about exiting and how they would do that. >> no. there's an issue about whether they need to start getting rid of the bonds as opposed to raising interest rates, the timing of those two things and how they come through over the next couple years. the key message is we're in no great hurry to raise interest rates. when we do, they're probably not going to rise very far. whether the markets believe them is another matter altogether. the market has been wrong every single year. what the fed has said and what the markets believe have been two different things. >> they have managed it quite successfully. is that the fed or the investors saying we don't necessarily believe there's going to be sustainable growth in a few years? >> if you look at the short end of the market and the futures

curves, the fed funds a year or two years down the road, they've been consistently saying rates are going up. i personally think, this is a story about u.s. economy growing in this recovery much more slowly than in the past. also importantly with remarkably low rates of inflation. this is true because of the u.s. and the eurozone and the uk as well. they all talked three or four years ago about qe being a mechanism to generate inflation. we've had quite the opposite. >> presumably because of the transmission mechanism in the banking system. being impaired, isn't it? >> that's part of it. no doubt -- particularly i would say in europe. i think there's another issue. after a financial crisis you get deleveraging taking place, people wanting to repay debts they've built up in the earlier times.

not only the supply of credit is limited but the demand for credit is equally limited. it might still be the case you didn't get much in the way of borrowing taking place in the economy. still to come, we'll be back out at st. petersburg as we look at what can be gained or lost by leaders that chose to snub the st. petersburg forum. cars are driven by people. they're why we innovate. they're who we protect. they're why we make life less complicated. it's about people. we are volvo of sweden.

you're watching "worldwide exchange." global equities pushing hard. the fed minutes. u.s. tobacco landscape looks set to change with reynolds, american and lorillard in merger talks. and more than 30 people have been killed after a blast ripped through a market in western china. meanwhile, the economic forum is under way in st. petersburg. spief as we call it. jeffrey, you've turned up an awful lot of western and north american ceos. >> yes, absolutely, ross. that is a bit of a back story to what's going on here at the st.

petersburg international economic forum. this is a show case event really where the russian government wants to demonstrate russia's economic prowess and also encourage a lot of western companies to come and invest. if you looked at the numbers last year, you know, anywhere between 15 and $30 billion worth of deals were actually inked at this event. this time round it is a bit different, of course, because of the ukraine story and the sanctions that have been imposed by the west on russia as a result of what they see as president putin's interference in the ukraine and also the annexation of crimea. but not everybody has stayed at home. we have seen some western executives come here. we caught up with mr. dico at jc dico. we asked him about how he felt about those who have chosen not to come. >> i started to invest in russia back in 1959 when we installed

the first -- in st. petersburg. st. petersburg is kind of my hometown when it comes to russian investment. russia is now the third largest out of home media market. it's almost the size of the uk at $1.4 billion. when you look at what has happened in russia, if you don't have the guts to invest here, you better stay at home. >> so that was jean-francois decaux of the advertising and billboard group. let's move on. christian morales has joined me. he comes to us from intel, intel, the chipmaker has, what, a thousand engineers in russia, local russia hires. christian, good to see you. >> good morning. >> you have business operations here already and a good reason to be here. but did you ever think, well, maybe i shouldn't attend this event this year because of the

sanctions? >> well, we have been here for about 20 years. russia is about 140 million people as a region, about 300 million people. europe, eastern africa, we call on 2.3 billion people. this trip was planned for a long time. i'm coming here several times a year. there's a lot of cooperation with the ict industry in russia. our engineers are important for the corporation. we have strong ties with this country and obviously we're going to be obeying international laws or zigs that are made by the political leaders. but for this event here, i've been attending this one for seven years in a row now. since they kicked off the new format of the economic forum. >> you think it's important to continue the dialogue even if, on a political level, some of the discussions have broken down. >> the political leaders have to

make their decisions. we are going to follow the recommendations, obviously. from a business standpoint, we keep working with our customers. we have a lot of technology users in this country. there is a lot of buildup in cloud, data centers, wearables and so on and so forth. yes, there is a vibrant ict activi activity. >> this is an economy that is now skirting with recession for 2014, in terms of your ability to sell and deliver into this market, do you feel that you now need to downgrade expectations and sanctions are going to make those numbers even worse? >> well, if we look at the last five years which has been challenging from a financial standpoint for the whole world, some countries are now getting better and getting out of the recession. here in russia we have seen ups and downs. when some of the countries were going down, russia was still growing. when some of the countries were growing, russias with kind of

shrinking in some segments. if i look at enterprise, they're kind of slightly growing. if i look at the consumer segment in the last two years, they have been overly cautious. we've seen the move to mobility slowing down in this country. >> are you concerned at all that there may be a structural shift taking place here? that the russia that wanted to engage with the international business community that saw itself as growing its links outside of russia, that that russia has gone, that this has changed into a much more inward, focused, nationalistic country? >> this government has launched transformation initiatives several years ago here in st. petersburg at this economic forum. there is certainly a willingness to diversify the economy from the natural resources and move it to the ict where they have -- where russia has very strong expertise in all of those domains.

and to keep being very focused on those initiatives and, you know, we just look forward to the opportunities to keep on growing here and we also see russian companies becoming more international, which is the trend we see in other places of the world. >> christian, it's been a pleasure. thank you very much. we didn't get a chance to move on to mobility or the key issues for you at the moment. i know we'll catch up in london and have those conversations. >> thank you very much. >> christian morales, with us from intel. ross, i'll send it back to you. i'll just mention once again, i will be speaking with president putin tomorrow at 12:30. i hope our audience will make a point of joining me for that. let's send it back to you for the time being. >> yes, i think that's a not to miss interview, jeffrey. thanks for that. you can also catch it all online. we have a special report @

report @spief@cnbc.com. stay tuned for more on why the chinese online retailer is beating expectations. as we do so, reminder, we're weighted to the upside ahead of the u.s. open in europe. advancers outpacing decliners around about a ratio of 6.3 on the stoxx europe 600. double points or .then fuelh double miles on your next getaway. make every stay more rewarding and feel the hamptonality

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we have news coming out concerning the ukraine. nato's rasmussen is saying on twitter that nato has seen limited russian troop activity near the ukrainian border that may suggest some russian forces preparing to withdraw. this is ahead of the ukrainian elections this weekend. it also follows a report that we've seen an explosion at a ukrainian military checkpoint where ap journalists reportedly seeing 11 people killed. we'll keep our eyes on -- a shooting rather than explosion. we'll keep our eyes on that, more details on that. u.s. futures if you just tuned in this morning suggest we might get another move higher after the gains we saw yesterday, the dow having its best gain in five weeks, bouncing off of three-week lows. right now it's call higher by 15 points. the s&p 500 is up by 1.5 points. the nasdaq higher by 5 after

moving up 0.9% in wednesday's session. jd.com priced its ipo at $19 per american depository receipt. the offering values the chinese online retailer at $24 billion, which is roughly the market cap of kellogg or applied materials. and the firm will start trading today on the nasdaq under the ticker jd. the ceo -- cfo, rather, will be on "squawk on the street" on a first on cnbc interview today at 11:00 a.m. eastern. don't miss out on that. eunice has more on the ipo. jd is like the retailer alibaba. it's pretty easy to use.

i want to buy usb. this one looks good. it's $5. one extra dollar for shipping. in a big city like beijing, you can get same-day service. all we have to do now is wait. jd.com is much small are than alibaba but it could still pose a threat. pep expect to start seeing jd on we chat. we chat is a hugely popular social media platform. the owner of we chat just bought a stake in jd. jd.com is weighed down by costs. it spends a lot on warehouses and delivery staff while alibaba makes money off of transaction fees on its virtual marketplaces. jd is betting that as more chinese people shop online, its investment in infrastructure will pay off. it plans to use part of the money from its ipo in new york to build out its distribution network into smaller cities. >> come in!

it is 12:30 and only two hours after i placed my order. jd wants the service to be this fast all over the rest of the country. eunice yoon, cnbc, beijing. >> there you go. jd.com. stocks trading today on the nasdaq. cfo coming up later on cnbc. also still to come, under pressure, will mario draghi be forced to talk? the futures this morning suggest we are going to tick higher once again at the open today after pretty solid gains wednesday.

this is "worldwide exchange," i'm ross westgate, a recap of the headlines, global equities higher on china factory activity. and the fed minutes, there's a shot of divergence in european pmi data. reynolds, american and lorillard are reporting advanced talks on a merger that could ignite competition for the tobacco titan altria. and there may be evidence of a withdrawal of russian troops from the ukrainian border.

though it is being reported that 11 people have been killed at a military checkpoint in eastern ukraine. the ceo of russia's leading oil company says sangs are not behind derg his business, although the chief of servistar said sanctions are harmful for all. >> the sanctions against russia, it did not bring and will not bring positive results. because sanctions amplify tension. you're watching "worldwide exchange." we had a good rally yesterday. the dow having its best day in five weeks, bouncing off three-week lows. futures suggest we'll tick modestly higher at the open this

morning. the nasdaq up 0.9% last year. the s&p 500 up 0.8% in wednesday's session. and the dow at the moment is higher by around 14, 15 points. those futures gone a little bit higher in the last 30 minutes or so. european equities have been sort of flat to higher this morning. the ftse 100 we had the first quarter gdp re-affirmed at 0.8% on quarterly growth. pmis for germany, slight divergence. manufacturing just dipping down, still well in expansion territory. but a real boom on the services side. france this morning, the composite pmi number was back into contraction. sharp divergence again between france and germany. french gdp in the first quarter absolutely flat in the first estimate. that stock market down 0.2%. ftse mib off around 0.7%. now, speaking of italy, the

country's second biggest bank is keeping an eye on the ecb's june meeting for much awaited action. carolyn sat down with the ceo and asked whether a summer rate cut would be too little too late. >> my understanding at this point is that the real mover would be to deval wait the euro, so the real target is the devaluation of the euro. only true, the devaluation of euro, you can have it increase a real economy in europe. in the attitude would not to be to a quantitative easing exercise. >> when you talk to clients, to investors, what do they say is the biggest risk? what is something that is right now underappreciated by the market? >> my view is that they are waiting for the ecb action. the real point of turn would be the confidence of draghi at the

beginning of june and so at the end of the confidence we would be in a position to understand the clear vision of the investors. >> he's an italian like you. do you have trust in him? can he deliver? >> i think he can deliver a quantitative easing program. that's what i'm hoping to see. otherwise we'll have not only a significant impact on real economy but on the financial economy. you can have an impact on interest rate, but not on real potential of lending and internal demand for the company's within europe. in case of devaluation of euro, italy can be one of the best placed country. >> that was the cfo. they seem to have wanted to talk

an awful lot. action is sort of the last thing they want to do. if they don't, are they going to lose credibility? >> i think now they'll have to do something. the question is what. when will qe happen? and if it does happen, will it be effective? the last person being interviewed was quite right in suggesting the ecb should be thinking about lowering the exchange rate. the problem these days -- >> they don't have control over the exchange rate. >> every country wants a weaker exchange rate. no one wants to have a stronger exchange rate. there's a currency war going on. even if the euro went down a bit, it's exporting the problems to some other part of the world. the underlying difficulty, more so than perhaps in the u.s. and uk, this is a region which is beginning to suffer from what is a worrying disinflationary trend. it's been in place for a year, year and a half. this is an obvious thing to be

happening. it's about the german inflation is very, very low. less than 1%. and to suggest that it's going to be easier to get back to the inflation target under these circumstances, that i think -- >> those who -- we know the problems of disinflation are. it doesn't help if you have large, outstanding debts. if we have wage growth, though, that's going above inflation, that is helpful, isn't it? >> that's certainly true. that's certainly the case if you have wages picking up. that's pretty helpful. there's not much evidence of productivity. the credit system is dead. i would say there are greater similarities with the japan style deflation than the good deflation you just described. that's the thing that's worrying, the fact that inflation is so low, perhaps expectations might shift down themselves. >> what it sounds like is you're making an argument there should be full-blown qe. do you think there should be? >> that's a helpful thing along the way.

i think there are more fundamental issues. >> structural issues. >> yes, issues with regard to banking union, fiscal union, political union. all these things are very difficult to deliver upon. >> the pressure has been taken off because we've seen a huge compression in spreads and yields and peripherals have come down. in some ways is that what's eased? >> there's pressure on them to make sure capital and lending is of good quality. that lending more to governments. governments are benefiting currently. there's money flowing through into of the goes. the spread into the broader economy is where it's very limited. >> thank you for joining us, stephen king from hsbc. still to come on "worldwide exchange," a smoking deal, a mega merger being rolled up in the u.s. tobacco industry.

cars are driven by people. they're why we innovate.

they're who we protect. they're why we make life less complicated. it's about people. we are volvo of sweden. you're watching "worldwide exchange." the s.e.c. is reportedly probing schwab and merrill lynch for violations in their brokerage accounts. some of the accounts which held millions of dollars were reportedly linked to mexican drug cartels. it's unclear what penalties the s.e.c. would seek. in 2008 it fined etrade $1

million for failing to verify the identities of more than 65,000 account holders. schwab, bank of america, charles schaub up 2% and bank of america up 0.2%. mary barra briefs about the switch recall. they plan to compensate victims. both could be done in a few weeks. barra also told lawmakers gm can't keep up with demand for replacement ignition parts though it should catch up by july. the tobacco industry has come under harassment for years now. it still generates hundreds of millions of dollars of sales. seema has more for us. >> reynolds, american and

lorillard are reportedly in advanced talks on a merger that could reshape the tobacco industry. a deal would combine such cigarette brands as camel, pall mall and newport. altria which sells marlboro cigarettes as a 50% market share while reynolds and lorillard have 27% and 15% respectively. reports say the company is working to finalize a deal within the next few weeks. buying lorillard would give reynolds a leg up in the fast growing ecigarette market. lorillard has the top selling blue brand at convenience stores and gas stations. reynolds has vuse which is currently sold in just two u.s. states. british-american tobacco will likely have a lot to say as it owns a 42% stake in reynolds.

any deal would likely face antitrust scrutiny as it would place about 90% of the u.s. tobacco market in the hands of two companies. the fda is also considering a ban or restrictions on menthol cigarettes after it banned all other flavors in 2009. lorillard gets about 80% of its revenue from menthol. news of a potential deal has swirled for months, reports say speculation was heightened last month when reynolds brought back susan cameron to lead the company. she helped oversee the integration of brown & williamson which reynolds bought in 2004. checking shares of reynolds, up about 4.6%. b.a.t. also on the move. over to you. >> thanks for that, seema. always good to see you. that's the latest on the potential deal in the tobacco industry. still to come in a few moments on cnbc, what is going

to happen in ukraine ahead of the elections this week? and we'll get the latest from kiev. julia is there. see you in a few moments.

the st. petersburg economic forum is under way. with the backdrop of ukrainian elections this weekend, jeffrey is in st. petersburg. julia is in kiev, the ukrainian capital. we'll come to her first. but first let's remind you, nato's rasmussen says russian troop activity near ukraine's border suggests a withdraw from the region but answered it's too early to tell, this as 11 people reportedly have been killed at a military checkpoint, according

to ap journalists. how is that impacting events in kiev where julia is ahead of that election? julia? >> thanks so much, ross. let me bring you up to speed. the government here as confirmed a number of servicemen have been killed. also a number of wounded with clashes with pro-russian separatists in the east. it was around 20 kilometers south of the donetsk region in particular. we have a separate report of attacks, one soldier killed, two people injured, this time in the donetsk region. both regions in the east of ukraine. this has been a period where we've seen attacks and conflict over the next few weeks. we are seeing a pickup in tensions as we head towards the elections. the russian media is reporting that the leader in the donetsk region is calling on the russians to bring in

peacekeeping forces. there's different reports of just how many people have been killed. we don't know right now whether it's all ukrainian servicemen or whether there are pro-separatists involved in this. separately, too, we've got border guards, ukrainian border guards apparently rebuffing an attempt for a number of pro-separatists to come across the border in tanother region. you have to remember, nato this morning saying limited withdrawal is what they're seeing. so very much conflicting reports here about what russia or pro-russian supporters activities are right now. we were expecting a pickup in tension, ross, i think i have to point that out and contextualize again, that this has been an ongoing thing. certainly it seems a ratcheting up the tensions in the east as we head into this election.

back to you. >> thanks for that, julia. that's the latest in kiev. how does that impact discussions at st. petersburg? jeffrey is there. jeffrey? >> ross, thanks very much indeed. this is effectively an economic forum. over the years it's been billed as president putin's personal economic forum. a rival to the world economic forum in davos if you like. it's meant really to show case russia and its business community and its economy. of course, this year, the event has been somewhat overshadowed by the events in crimea and in the ukraine. of course, this weekend, we also have the presidential elections which will take place in kiev and across the ukraine. and everybody's looking really to mr. putin to see what comments he may make running into the elections. now, as he was in shanghai

signing this new gas deal with the chinese, he did also talk about -- a bit about the politics and said that the russians are going to pull their troops back from the ukrainian border. this has been an incredibly sensitive issue as far as the west is concerned. so that's where we currently stand on that story. while we've been here, we've been doing our best to talk about the impact of sanctions on russian companies and an western companies. of course one of the other challenges has been just finding western business people to talk to. because a lot of the high profile ceos, americans and germans, have pulled out of this whole event. they've sent their june onpeople here or they've not attended at all. let's come back to the sanctions issue for just a moment here. let's give you a sample of what

we've heard from those we've spoken to about the impact. >> i don't think the west should be in the business of backing folk throwing rocks to remove democratically elected presidents. it doesn't threat to impose sanctions that we're not going to impose, especially because germany and france aren't on board. >> sanctions amplify tension, amplify problems but not help resolve it. i do believe russia should not be engaged in this race of sanctions. >> unilateral sanctions really hurts the u.s. and basically, the reason it hurts the u.s., first of all it

doesn't achieve its objectives. if anything, it makes russia stronger and more conservative. secondly, it erases lots of questions in other people's heads about, you know, how it will happen. >> for the time being, there's been no impact whatsoever except that the gdp in russia is now this year probably going to be flat. one of the broader themes as we've come into this event as well, ross, has been this talk about a so-called pivot east. if relations are going to be frosty between the americans, the russians and the western europeans and the russians, maybe russia needs to look somewhere else for security of demand for the oil and gas itselves. of course we've seen this deal inked between the chinese and the russians. it's a 30-year deal that will

involve gazprom selling gas into china. it's a $400 billion deal, so huge, and it involves significant infrastructure investment in the russian far east for it to actually work. the real issue here, though, is this just a diplomatic coup in essence for president putin and a little bit of show boating about the east? or is there something more meaningful here that could ultimately impact the safe supply of gas and energy from russia into western europe? just another one of those thorny issues that we're teasing out while we're here. i'll have the opportunity tomorrow, 12:30 cet to talk to president putin on air about exactly what his intentions are with regard to the ukraine, the economic outlook for russia and this so-called pivot east.

back to you, ross. >> he didn't get the gas deal, did he? >> he didn't get the gas deal. >> in china. they didn't sign. they thought they would sign. >> i think you'll be comfortable with what he did seal. they've been talking for a decade about this deal being negotiated and signed off. you wouldn't expect it to be rushed through in 24 hours. i think they have enough on paper to be able to turn around to the west and say, look, this is where we can sell it if you guys don't want it. back to you. >> it will be a great interview. can't wait to see what happens. plenty more on the st. petersburg forum online at cnbc.com. that's about it for today's edition of "worldwide exchange." european equity markets fairly flat this morning. a mix, u.s. futures indicating a tick higher at the open. watch the action on the

countdown to the opening market state side today. "squawk box" is coming up right after this.

good morning and welcome to "squawk box." better-than-expected economic data out of china, giving the markets a boost. wall street looking to extend yesterday's sharp gains and that snap back we saw. and also a potential deal for big tobacco? people still smoke? reynolds american is reportedly in advanced talks to buy lorillard. and mcdonald's holding its annual shareholder meeting today with more protests expect over hiking wages at the restaurant chain. it's thursday, may 22nd, 2014. "squawk box" begins right now.

>> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we start this morning with the markets. the dow is coming off its best day in a month. among the catalysts for that big gain we saw yesterday, fomc minutes that showed no sign rate hikes are coming anytime soon. central bank officials also said that the economy is picking up steam and that the labor market is improving. if you take a look at the futures this morning after that gain of 158 points yesterday, you'll see the dow futures are indicated slightly up, up by 8 points. s&p 500 futures up by less than one point and the nasdaq up by just over two points. let's take a look at the ten-year note. that yield has been something the market has been watching closely. this morning it's sitting at 2.55%. the global markets getting a boost from the u.s. optimism. in addition, we had new data overnight, showing chin a's factory activity turning in better numbers than the